Accounting · Property, Plant and Equipment (IAS 16)
An aircraft engine damaged in an accident is replaced with a new engine costing $10.8 million. Which of the following explains the correct accounting treatment of the replacement engine under IAS 16?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Write off the damaged engine, capitalise the new engine and depreciate over 36,000 hours✓
- 2Capitalise $6 million to replace the damaged engine, expense the other $4.8 million
- 3Treat the $10.8 million as a repair to the damaged engine and continue to depreciate the engine as in the first 6 months
- 4Write off the damaged engine, capitalise the new engine and depreciate over 24,000 hours
Correct answer
Write off the damaged engine, capitalise the new engine and depreciate over 36,000 hours
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